Monday, 10 November 2014

Malaysia's Cagamas adds amortisation to bond, sukuk programme

Malaysia's state-backed mortgage lender Cagamas Bhd has broadened the scope of its 40 billion ringgit ($12 billion) bond and sukuk issuance programme by adding the use of a novel amortisation format, a regulatory filing showed.

Cagamas's mandate as the national mortgage corporation and the leading issuer of AAA debt securities in Malaysia is to facilitate home ownership but, is also exploring ways to develop a deeper and more liquid domestic bond market.

An amortising bond is structured in a way that gradually reduces the value of the bond over a fixed period of time, meaning the borrower pays off the full amount before the final maturity date.

Amortising bonds are commonplace, but the format is rare for sukuk. Last year, Dubai's Emirates airline launched the first such sukuk in the international market, a 10-year $1 billion deal with an average weighted life of five years.

Cagamas said it had received confirmation from its sharia advisers and the capital market regulator for the proposed change to its issuance programme.

This would not affect the programme's AAA credit rating from RAM Rating Services, the company added.

In 2012, Cagamas broadened its range of issuance with the introduction of an agency-based sukuk known as wakala, which is acceptable to Islamic investors from outside Malaysia for trading in the secondary market.